Dell Competitive Advantage Essay

Introduction

Through a review of the literature on competitive advantage in mature industries I hope to increase my understanding of Dell Computer’s performance over the past fifteen years. When I joined them in 2000 they were the second largest personal computer (PC) manufacturer in the world, with a growth rate nearly twice that of the market (Gartner, 2001). Within a year they had taken the number one position (Gartner, 2002). Their success was to be short-lived and by 2009 they had fallen to third place (Gartner, 2010). What were the factors which led to their initial success and why did they cease to deliver an advantage? Were they related to the maturing of the PC industry? What strategic alternatives did they neglect and were these used by their successful competitors?

Sources of Competitive Advantage

Our textbook (Grant, 2013) describes four potential sources of advantage in mature industries.

Cost advantage, delivered through economies of scale, low cost inputs and low overheads, is the first. Dell had substantial and increasing economies of scale, however their inputs were substantially commoditised (Liddle, 2006) and their already extremely lean supply chain limited their capability to reduce costs further.

They aim to leverage their (supposed) unique capabilities to deliver customer value and so find competitive advantage within an industry where all the external forces and raw materials are consistent. The resource based theory (RBT) (Barney and Clark, 2007) formalises the use of valuable, rare, in-imitable and non-substitutable resources to develop sustainable competitive advantage. This is particularly apt in discussion of differentiation as cost is typically replicable. In Dell’s case we can see that their direct model gave them a differentiation advantage by delivering new technology to customers faster than competitors who needed to clear their channels of old inventory